Author Topic: What is the better route funding wise?  (Read 1975 times)

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Offline theketchuptheory

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What is the better route funding wise?
« on: January 29, 2014, 09:51:38 PM »
So I've been toying with the thought of opening my own pizza spot. Something on the verge of Neo-Neopolitan. Electric Oven for even bake and a slew of pies 5 vegan, 5 white, 5 red (15 in total) with room for growth creativity wise (with suggestions from customers or with what my future partner has in mind). I will also have an option for gluten free pies. I'm in the 5 boroughs of NY but I am also considering San Francisco, Atlanta, Cleveland, Philly.

I've been soul searching a lot through these forums, maybe I missed something, but what is the best way to start up with very low capitol (I work at a retail job). Would talking to banks for loans work or should I start first with a kickstarter? Average rent from what I noticed goes between 3000-6000 a month is there a specific threshold I should consider for opening a "sit down" restaurant with takeout?

I make my own dough and vegan cheese and (depending on the location) will partake in a community garden. I'm trying to be as local as possible with my ingredients and I care a lot about supporting local business. Where should my first step be in making this a reality?


Offline lungieboy

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Re: What is the better route funding wise?
« Reply #1 on: February 03, 2014, 08:48:27 AM »
Hi...I'm new to the forum but have had the same thoughts. It's tough for an individual who has no "business history" to strike a loan from the traditional banking system. Here is a funny story I experienced....my business of 23 years was a victim of the recession with large accts. going belly up and effectively putting me out of business.

I decided to start a new business in a different field....went to my local SBA...he looked over my business plan etc..He gave me a contact to a bank that makes loans to small businesses like mine. So, I spoke to the banker, who knows the SBA guy really well and looks at these referrals, from the SBA gent, as good candidates.

Check out what he tells me: Since I have no experience in this new field and have no business history in the new field to present ( DAH!, isn't that why I went to the SBA?! Isn't that one of the things the SBA is for...starting new businesses!!? ) the bank will not be able to give me a loan. It was a micro loan of 30 grand. I have a great credit history.

The kicker is this: He tells me he can loan my OLD business the money, so long as I use it for what the old business was doing. He full well knew that my old business was dead and that's why I was starting over. I asked him.." you will loan my old DEAD business money, but not a new one? A business that has no future?" . HE said "yes...because it had a 23 yr history and I had experience in that field"...this was Key Bank in 2012. I had 75 grand of my own money going into the project...I had skin in the game, still no dice. The SBA guy was left with his mouth open.

Maybe things are better today? ...Do you have ANY funds? Is family able to kick in ? Do you have a business plan?

Kickstarter has helped many but get your ducks in a row BEFORE you make your pitch.

Offline theketchuptheory

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Re: What is the better route funding wise?
« Reply #2 on: February 03, 2014, 09:47:24 AM »
Hey lungie thanks for the reply!

I only have enough funds for the first few months rent. I just need more of a start-up capitol than anything. People who I talk to about the project (other owners, customers at my job and my friends and family) are excited for it. I spent the last two years sourcing my ingredients. I'm a young guy (I'm only 23) but I'm doing all the research I can to have the knowledge for when I do open.

Currently I started making pizzas for parties and all of those funds are going straight into this project. I also hold pizza parties to test topping combinations.

This project is pretty niche though. I want to cater to people who are both vegan and celiac as well as serve some traditional pies. I know there's a market for it in the areas I listed above so I know it will do well.

It's insane about the SBA, that's why I was going the DIY route.

Offline lungieboy

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Re: What is the better route funding wise?
« Reply #3 on: February 03, 2014, 11:38:01 AM »
No problem dude...be careful with leases and landlords.

Back in the day, in NYC, new businesses could sign the lease under the BUSINESS name. If things didn't work...well that was that.....Today, well that's a different story. No landlord will take a signature on a lease space, from a new business, without YOU personally signing...meaning, YOU are on the hook personally for the lease...that's called a Personal Guarantee.

What does that mean? If you sign a 5 yr lease and say 2 yrs into it you figure it's not working, the landlord is holding YOU responsible to personally pay the other 3 years...this is not to scare or discourage from going into business...it's just to educate you and better prepare you for possible pitfalls.

This has been in practice for some years now, as landlords got tired of people walking away and they then needed to rush to fill a space, while missing rent monies....yeah, you may be real nice and be current with your rent and even give the landlord a "heads up", but legally, you are on the hook. If he's cool...IF...he will not hold you to it ....usually if he can get someone in the space ASAP....but if he pulls you into court with the contract, the only way out is to declare bankruptcy...not cool for you....or you can get a judgment against you for the remainder of the lease and have that haunt you and your credit history....not cool for your future.

If you can start establishing some catering gigs, you can rent time at a commercial kitchen....get a reputation.....then save some dough...pardon the pun...and get a retail space that works for you.

Offline lungieboy

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Re: What is the better route funding wise?
« Reply #4 on: February 03, 2014, 11:40:44 AM »
.....I meant to write....or he can get a judgement against you...

Offline pythonic

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Re: What is the better route funding wise?
« Reply #5 on: February 03, 2014, 06:56:19 PM »
No problem dude...be careful with leases and landlords.

Back in the day, in NYC, new businesses could sign the lease under the BUSINESS name. If things didn't work...well that was that.....Today, well that's a different story. No landlord will take a signature on a lease space, from a new business, without YOU personally signing...meaning, YOU are on the hook personally for the lease...that's called a Personal Guarantee.

What does that mean? If you sign a 5 yr lease and say 2 yrs into it you figure it's not working, the landlord is holding YOU responsible to personally pay the other 3 years...this is not to scare or discourage from going into business...it's just to educate you and better prepare you for possible pitfalls.

This has been in practice for some years now, as landlords got tired of people walking away and they then needed to rush to fill a space, while missing rent monies....yeah, you may be real nice and be current with your rent and even give the landlord a "heads up", but legally, you are on the hook. If he's cool...IF...he will not hold you to it ....usually if he can get someone in the space ASAP....but if he pulls you into court with the contract, the only way out is to declare bankruptcy...not cool for you....or you can get a judgment against you for the remainder of the lease and have that haunt you and your credit history....not cool for your future.

If you can start establishing some catering gigs, you can rent time at a commercial kitchen....get a reputation.....then save some dough...pardon the pun...and get a retail space that works for you.

Liable for rent even if you are incorporated?
If you can dodge a wrench you can dodge a ball.

Offline lungieboy

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Re: What is the better route funding wise?
« Reply #6 on: February 03, 2014, 07:18:58 PM »
YES!!!....this is NYC. They have their own rules. This is a city of 8 million people. Lots of businesses come and go and landlords will always protect their A--'s. Empty space means they lose money. Now if you've been in business for some years and you have a good reputation, well, that's another story. They will take the signature of an established corp with history,  on the lease. BUT if you are a  noob business, you sign with your name.

That's one of the things that makes doing business in this city a real B-tch.

I bet you get the same rules in many Metro area's of the country...LA, Chicago, Philly...any body wanna pipe in?

Offline VAscotty

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Re: What is the better route funding wise?
« Reply #7 on: March 06, 2014, 01:19:40 AM »
Personal guaranty is pretty standard, but you can always negotiate it out or only guarantee a portion of the full lease. Keep negotiating until the other guy is pissed at you.

Offline lungieboy

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Re: What is the better route funding wise?
« Reply #8 on: March 06, 2014, 06:13:24 AM »
Depends on the landlord....in the 5 boro's of NYC you simply cant negotiate it out. If the spot is good the landlord doesn't have to bother as someone else will come along and sign one....if the spot sucks, well that's another issue altogether whereas you probably shouldn't take it anyway...NYC is not a place to pick up deals when you are under funded.

Offline TXCraig1

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Re: What is the better route funding wise?
« Reply #9 on: March 07, 2014, 12:24:28 AM »
Liable for rent even if you are incorporated?

If the corporation is the only signatory to the lease and you run your corporation like a corporation (don't mingle personal money with business money, have BOD meetings, etc.) then the owner(s) probably won't be held liable. Most landlords won't sign a new lease with a new or thinnly capitalized corporation however UNLESS the owners also sign a personal guarantee, and then you are liable.
Pizza is not bread.


Offline lungieboy

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Re: What is the better route funding wise?
« Reply #10 on: March 08, 2014, 04:32:39 PM »
Exactly.....which is what any landlord in the NYC area will do to a "brand new" corporation.....unless you've been in the restaurant biz and had different places then the landlord will probably take the corps signature since you as an owner, have some sort of track record.

The original question is from a person who has no track record....therefore any landlord worth his salt will make him sign a personal guarantee...I speak of what I now. I've spoken to many a broker and to landlords themselves

Offline Gosseni

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Re: What is the better route funding wise?
« Reply #11 on: March 17, 2014, 01:35:22 PM »
You need a business plan. Do you know how many pizzas you need to make a month to cover overhead and pay the bank back with interest? How are you going to get people into your place? What distinction do you bring to the industry? There are great business plan templates out there. You will need to complete one of those before any lender (besides angel/friend and family) will take you seriously. Remember..... "A goal without a plan is just a wish."

Offline gabaghool

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Re: What is the better route funding wise?
« Reply #12 on: May 23, 2014, 12:14:44 PM »
I know I will catch crap for this...but its worked for me....twice......Planning takes a lot of time.....location, menu, etc.  During that time apply for credit cards.  Unless you have a horrible credit....you will get more than enough cards.....i would suspect around 150K.  I've used this as a way of opening 2 places.  It is NOT ideal, but it works.....and you are not personally liable.  I know it sounds scummy, but when my family's well being in on the line......the choice is easy. 

I've paid  both off, which was always my plan.  But, for someone starting a restaurant, and you are NOT an investor looking where to park your millions, IMO, this is the best option.

If you can pay it off quickly, your interest rates will remain low....HOWEVER, if the cc companies find out you have a high percentage of credit used.....that will jack up the payments.......incredibly.  But, thats a chance you take in business.  Sometimes, you have no other choice.  Especially in this business, where you stand NO CHANCE of accumilating wealth  UNLESS you own.  Its a big chance....but one that I can't see someone NOT taking.

CC companies can charge immoral interest rates, so to me, it allows me to gamble with their money.  I've paid back every single penny......and they are lucky.  I wanted to pay back my debt.  And I did...sometimes under very uncomfortable situations.   I gambled and I won.......I just want people to know this option is available.  Have a dream, decide that you will bust your balls to attain that dream and follow through with you plan.....and things should work out.

Getting a bank loan for a restaurant is imposssible, unless you have the money ALREADY to open a restaurant.......getting investors is TOUGH, unless you have a long and storied career as a chef in your particular town (everyone wants to bet on a sure thing) so CC are about the only avenue.  LOTS of vialble, semi famous businesses did it this way.  And its the safest way.

I hope I stated all this properly.

Offline Donjo911

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Re: What is the better route funding wise?
« Reply #13 on: May 23, 2014, 12:41:01 PM »
This is all great advice clearly from folks who know.  One thing you said would make me nervous. "5 boroughs, Sf, Philly, etc."  I've moved from the mid west to SF, to Los Angeles, and now Oregon.  Don't underestimate how different and fickle each market is.  Not just the national trends...local trends too.  I would suggest that you execute your plan in an area you know very well.  It's fascinating to see how markets are different and how they change.  It would be less fascinating if you were testing the market with your cash, credit, & reputation Especially at 23 but always generally a good rule of thumb.  ;)
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Offline lungieboy

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Re: What is the better route funding wise?
« Reply #14 on: May 23, 2014, 02:10:53 PM »
@gabaghool......dude that is ballsy. But you're right. It's almost impossible to have all the funds you need. I have never thought of that. In fact I'm probably too much of a chicken sh_t to even try....but I admire your hutzpah....wish I had that.

Offline Gags

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Re: What is the better route funding wise?
« Reply #15 on: May 23, 2014, 06:22:49 PM »
I know I will catch crap for this...but its worked for me....twice......Planning takes a lot of time.....location, menu, etc.  During that time apply for credit cards.  Unless you have a horrible credit....you will get more than enough cards.....i would suspect around 150K.  I've used this as a way of opening 2 places.  It is NOT ideal, but it works.....and you are not personally liable.  I know it sounds scummy, but when my family's well being in on the line......the choice is easy. 


Well written, Gabaghool! 

They say Spike Lee funded his first movie with credit cards...
"I'd trade it all for just a little bit more"

Offline gabaghool

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Re: What is the better route funding wise?
« Reply #16 on: May 24, 2014, 11:55:53 AM »
Thanks for the feedback.  When you think about it....id rather put my debt in credit cards than mortgaging my house....youre personally liable for that!!!  Your single, thats cool, but when you have a family....there is A LOT MORE to consider.  I care more about my family than anything else...so, I my situation, I will do CLOSE TO WHATEVER to provide for them the best way I can.  Yeah, its nerveracking there were plenty sleepless nights....BUT, there was AT LEAST A CHANCE of getting better. 

If youre in the food service business, aside from perhaps working for a food service company, there is NO CHANCE of making real money.  When i didn't own a restaurant, i had to get three jobs.  two full and a small part time.  This allowed me to bring in a decent amount of cash.....but at what cost?  I was NEVER, and i mean NEVER home.  I missed ALL of my kids special events.  I HAD to hit it big in order to simply have a NORMAL life.

There are LOTS AND LOTS of bargains out there.  DOn't think for one minute that all places go out of business because of the location.  They go out because of sheety food, huge mismanagement ( the restaurant business is a collection of TEMPTATIONS, all of mans worst temptations are present.....booze, drugs, women, late hours....a LOT of restaraunteurs fall prey to these....causing them to go out of business......so, lot of times, the out of business restaurant if a great opportunity to pick up 250K worth of stuff or 15-20 K.  Throw in some money in order to make the old aura go away......and your in business!.

Of course, if you have people with deep pockets, who trust you with their cash....thats the best way...but then you have people with NO IDEA about food service telling you what THEY would do......and often it is complete nonsense.  Credit cards provide you a means of being your own boss, of not being personally liable for debt.....scary, but ABSOLUTELY DOABLE.

Offline gabaghool

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Re: What is the better route funding wise?
« Reply #17 on: May 24, 2014, 02:50:52 PM »
@gabaghool......dude that is ballsy. But you're right. It's almost impossible to have all the funds you need. I have never thought of that. In fact I'm probably too much of a chicken sh_t to even try....but I admire your hutzpah....wish I had that.

Dude....check it out.....THINK about it......its NOT that you are chickenshit...you are simply a responsible, realialistic human being.  I you work the numbers....the pros and cons of each kind of funding.....you will see that cc are NOT so extreme.

Offline gabaghool

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Re: What is the better route funding wise?
« Reply #18 on: May 24, 2014, 02:54:19 PM »
Well written, Gabaghool! 

They say Spike Lee funded his first movie with credit cards...

Yeah....its AMAZING how many pretty well known successful companies chose this path.  Sometimes you simply don't have investors knocking at your door....in fact, NOT somethings.....the MAJORITY of the times.....the little guy has to do some guerilla fund raising.......  I gotta realize that people don't GAMBLE on someone UNTIL its not so much of a gamble.........then they can wax poetically how they saw your potential when no one else could .....yeah, RIGHT!!!   I got more people interested now to add money...waiting for me in the parking lot, etc...........my response is always the same......"where were you THEN??"

Offline gabaghool

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Re: What is the better route funding wise?
« Reply #19 on: May 24, 2014, 02:55:55 PM »
Good luck to you , KETCHUPTHEORY......seems like you got the drive....and that HUGELY important.